Power giant turns to Aussie coal

By CHRIS DANIELS

Genesis Energy is planning to import Australian coal this winter to overcome a shortage at its Huntly power station.

The state-owned power company is refusing to comment, but the Herald understands Australian coal will be shipped to Tauranga and taken by truck to Huntly.

Under this "coals to Newcastle" scheme, one state-owned enterprise would be importing coal for a power station that is on one of New Zealand's biggest coalfields, while another state-owned enterprise - Solid Energy - exports coal to fuel Japanese power stations.

Genesis' failure to secure adequate coal supplies is thought to be a major reason behind increasing Government scepticism about the free market's ability to ensure a secure electricity supply.

Coal supplies could be crucial if a cold, dry winter affects hydro power production.

Prime Minister Helen Clark dropped a bombshell on the industry this week, saying the Government was looking at further reform of the energy industry because of the failings of the market model.

The 1000MW Huntly station is New Zealand's biggest thermal plant, and its four generating units can run on coal, natural gas, or a combination of the two.

In the winter of 2001, it was able to increase production to make up for the power that could not be generated because of low southern hydro lakes.

Now, with Maui gas running low, daily limits on the gas it can draw from the field have been halved, meaning a shift to coal.

Solid Energy has said it will more than double the amount of coal it sells to Genesis this year for the Huntly station.

It will supply 800,000 tonnes, compared with 340,000 tonnes supplied in the 2001/02 year.

Whether this will be enough to cover the station through the winter is not known.

Solid Energy and Genesis say they are working to increase coal supply to Huntly to more than a million tonnes a year, which could mean the Australian coal is only a temporary measure.

The former state-owned power generator ECNZ, which was split into Meridian, Genesis, Mighty River Power and Contact, had contracts with Solid Energy's former incarnation as Coalcorp, to keep up to one million tonnes of coal available for rapid use in Huntly.

Solid Energy chief executive Don Elder said this coal was no longer kept ready for Genesis.

The company worked on a "just in time" basis, and it was not worth the cost of stripping earth from coal and keeping huge stockpiles.

The New Zealand coal industry was small, and it would be difficult for production to be increased quickly to meet a huge order.

Elder has been touting coal as the answer to the potential shortfall in electricity generation, due in the next few years while new natural gas fields are brought into production.

He says a new coal-fired power station, possibly near Auckland, could be the next addition to New Zealand's electricity generation.

New Zealand's coal fields were the equivalent of 50 Maui gas fields, said Elder, and could keep energy cost at current levels for 1000 years.

Despite technology that makes modern coal-fired power stations much cleaner than those built in the past, New Zealand's Kyoto Protocol obligations to cut carbon dioxide emissions will be the biggest hurdle for Solid Energy.

Burning coal to make electricity creates much more carbon dioxide than using other fuels such as natural gas.